Waking up to America’s economic nightmare

With the roughly 1,500-point rise in the Dow Jones average since early March, it seems investors have been dreaming about the good old days. This Bloomberg chart from last Thursday’s trading marks the apparent disconnect — you don’t have to be a stock market maven to sense that the dramatic rally will likely prove to be, in the parlance of Wall Street, the kaput kitty hitting the pavement.

Take your pick of grim indicators. For the last two months the Consumer Confidence Index has plumbed its lowest depths since its inception in 1967. As we learned Friday, the nation lost another 663,000 jobs in March, bringing the total to 5.1 million since the recession began in December 2007. Unemployment may be a lagging economic indicator, but there’s little to suggest that the wave is cresting or will be any time soon.

But the worst sign of all right now may be this: America is still stuck in the anger stage. Recently I overheard a classic strain of the outrage in a coffee shop in Noe Valley (hardly ground zero for hard times), in a conversation between two rather comfortable looking middle-aged adults. One was wailing away on America’s preferred punching bag, Mr. Wall Street Executive, for “raping the taxpayers” without remorse. His hair was so on fire that I feared his head might actually explode. Soon the talk hit on the hypocrisy of the Obama administration’s forcing General Motors chief Rick Wagoner to fall on his sword while Wall Street’s lords of finance so unfairly kept feasting on federal bailout funds. Somehow the disastrous story of the SUV-bloated American auto industry didn’t come up.

Indeed, we must also be in a recession of genuine awareness. While New York Times columnist Frank Rich can himself be shrill at times, he’s got it right regarding the continuing blame game:

Why is there any sympathy whatsoever for a Detroit C.E.O. who helped wreck his company, ruined investors and cost thousands of hard-working underlings their jobs, when there is no mercy for those who did the same on Wall Street? Might we, too, have a double standard? Could we still be in denial of the reality that greed and irresponsibility were not an exclusive Wall Street franchise during our national bender?

A prominent financial expert I interviewed last week for a forthcoming magazine piece on the economic crisis said to me at one point in our conversation, “Almost everybody who was part of the system failed.” He wasn’t only talking about Wall Street institutions, government regulators and the media.

Easily enough we get whipped into a frenzy over unjust executive bonuses or the sins of the media’s prime time ding-dongs. But what of America’s common financial lifestyle over the last two decades? As Rich continues, in answer to his own question: “Any citizen or business that overspent or overborrowed in the bubble subscribed to its reckless culture. That culture has crumbled everywhere now, and a new economic order will have to rise from its ruins.”

Even better put, it will have to be built from them. That will be painstaking, no doubt — block by block, brick by brick, as has been said by a certain someone. But right now, it seems, too many people are still standing on the outskirts shouting about who plundered the village, rather than heading into the collective rubble and really starting to pick up the pieces.

UPDATE: On a related note, Wall Street conspiracy theorists and/or Hollywood screenwriters will find plenty of grist in this Times front-pager on Larry Summers’ enriching hedge fund days at D.E. Shaw prior to joining Team Obama:

D. E. Shaw does not like to talk about what goes on inside its modish headquarters near Times Square. There, esoteric trading strategies are imagined, sketched on whiteboards and modeled on supercomputers by an elite corps of math wizards and scientists, most of them unknown to the outside world….

At Shaw, Mr. Summers, the professor, was often the student. The arrogant personal style that turned off some Harvard colleagues seemed to evaporate, Shaw traders say. Mr. Summers immersed himself in dynamic hedging, Libor rates and other financial arcana.

He seemed to fit in among Shaw’s math-loving “quants,” as devotees of math-heavy quantitative investing are known. Traders joked that Mr. Summers was the first quant Treasury secretary because he had once ordered dollar bills to be printed with the transcendental number pi — 3.14159… — as the serial number.